What the SBA’s CARES Act Provisions Mean for Your Business

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This legislation provides small businesses with options when it comes to weathering the economic impact of the novel coronavirus pandemic currently sweeping the nation. With more than $370 billion provisioned for small business relief, the bill aims to offer support to companies with less than 500 employees that were financially harmed by the impact of COVID-19 between Feb. 15, 2020 and June 30, 2020.

The bill seeks to provide aid through several initiatives, including

The Paycheck Protection Program (PPP), administered by the Small Business Administration (SBA) and the Department of Treasury.

Economic Injury and Disaster Loans (EIDL) and emergency grants, administered by the SBA.

Small Business Debt relief, administered by the SBA.

Tax provisions meant to reduce the strain on employers, including nonprofits, administered by the Department of Treasury.

Federally funded counseling and training to help guide businesses through the crisis.

What does all of this mean for your business? That depends on a number of factors, but the act is structured in such a way that you may be eligible for more than one type of relief. At UpCounsel, we’re invested in helping small businesses thrive—even in the face of tremendous odds. Our team of legal experts can help you navigate the CARES Act to determine which types of aid make sense for your business. Read on for an overview of the provisions, rules of eligibility, and to see your best options for relief when it comes to your business.

Paycheck Protection Program (PPP) Loans

A PPP loan provides employers with enough capital—up to $10 million—to cover employee payroll for up to eight weeks. If a company’s employees remain on payroll for the eight-week duration of the loan, the SBA will forgive the loan in full. This is a good option for businesses looking for a way to retain employees or cover additional costs in the interest of maintaining payroll.

Due to the nature of the loan, no collateral or personal guarantees are required, and neither the government no lenders will charge your business any fees. Although PPP loans are designed to ensure employee retainment, you may use the loan for other costs pertaining to your business such as rent, mortgage interest, or utilities, so long as you retain your employees and meet the payroll milestones set forth by the SBA.

Qualifying businesses employ less than 500 workers, including sole proprietors, independent contractors, and self-employed persons. Private non-profit organizations and 501(c)(19) veterans organization will also qualify. Some businesses with more than 500 employees may qualify under the SBA’s size standards for approved industries. Small businesses in the hospitality and food service industries with more than one location may be eligible if their individual locations total less than 500 employees. All qualifying businesses must have been affected by the onset of COVID-19.

When can I apply?

Applications may be submitted beginning April 3, 2020, and are available through June 30, 2020.

What do I need to apply?

Applicants will need their company’s EIN or TIN number, copies of their 2017 and 2018 taxes, and either their 2019 taxes or a 2019 profit and loss breakdown by month. Lenders will request documents to verify full-time employees on payroll, dollar amounts of payroll costs, covered mortgaged and interest payments or rent payments, and covered utilities for the eight week period starting upon receipt of the loan.

Learn how UpCounsel can help you get started with a PPP loan.

If your needs are more immediate, consider applying for an Economic Injury Disaster Loan, which carries with it an emergency advance grant of up to $10,000 paid within three days of applying for the EIDL. In addition to the advance, these loans provide relief of up to $2 million and carry a lower interest rate, with principal and interest deferment at the loan administrator’s discretion. These loans are available to pay for expenses that could have been met had the disaster not occurred, such as payroll and operating costs. Although this type of loan requires repayment, the advance is a grant, meaning it does not require repayment. This is a good option for businesses that need a quick injection of cash to stay afloat during this crucial time.

In order to access the advance, you must first apply for an EIDL. Once that loan is approved, you may request the advance. The advance itself does not need to be repaid under any circumstances and may be used for payroll, to pay for sick leave, to meet increased production costs due to disrupted supply chains, or pay business obligations including rent, mortgages, and debts.

Am I eligible?

As with the PPP loan, qualifying businesses employ fewer than 500 employees. Those eligible are sole proprietorships, with or without employees, independent contractors, cooperatives and employee-owned businesses, and tribal small businesses. Small business concerns and small agricultural cooperatives that meet applicable SBA size standards are also eligible, as are most non-profits of any size.

When can I apply?

Applications for the EIDL program are now open. EIDLs are available from January 31, 202-December 31, 2020. Grants are backdated to allow those who have already applied for an EIDL to be eligible for an emergency grant.

If I apply for an EIDL, can I also apply for a PPP?

Yes. PPP applications are open both to those who have previously applied for an EIDL unrelated to the current health crisis, as well as those applying for an EIDL related to COVID-19. Restrictions do apply. For instance, you cannot use your EIDL for the same purpose as your PPP loan. If you receive a PPP loan or refinance an existing EIDL into a PPP loan, any advance amount will be subtracted from the amount forgiven in the PPP.

Unfamiliar with the EIDL process? UpCounsel can help.

Small Business Debt Relief

If you have an existing non-diaster SBA loan, in particular, a 7(a), 504, or microloan, this program can provide you immediate relief from those commitments. Under this provision, the SBA will cover all loan payments on these SBA loans—including principal, interest, and fees—for six months. This relief extends to new borrowers who take out loans within six months of the President signing the bill into law.

Small Business Tax Provisions

Although not administered by the SBA, this provision (administered through the Department of Treasury) is a good option for businesses who are not applying for a PPP loan but are still affected by the current public health crisis. Under this provision, the government provides a refundable tax payroll tax credit for 50 percent of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit extends to businesses, including non-profits, whose operations have been fully or partially suspended as a result of government orders limiting commerce, travel, or group meetings.

This credit is provided through December 31, 2020, and is not available to employers receiving aid through the PPP.

Counseling & Training

In the face of unprecedented uncertainty, many small business owners will find themselves unsure of how to proceed in a landscape that is vastly different from anything they’ve previously known. The SBA is offering additional funds to local Small Business Development Centers (SBDC), Women’s Business Centers (WBC), and SCORE mentorship chapters to provide additional resources and support to businesses as they navigate the crisis.

Many of these financial programs can be affected by the FFCRA, for more info on how the FFCRA involves the CARES Act, read our recent post.

Still don’t see the information you’re looking for? At UpCounsel, our legal experts can assess your situation to determine your options and which type of loan or relief provision is best for you. We’ve all be affected by COVID-19, but the current situation doesn’t have to mean the end of your business. Let us help you get back on track.

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